American Economist Proposes New Tax Agreements for Caribbean Nations to Capture Overseas Income

A leading American economist has called for Barbados and other Caribbean nations to enter into new tax agreements that would allow them to collect taxes from their nationals working overseas.

Director of the Centre for Sustainable Development at Columbia University Professor Jeffrey Sachs offered the proposal as part of a broader effort to address fiscal challenges in the region, with other suggestions including investing more in climate resilience, education, and a strategic economic partnership with the United States.

Delivering the 37th Adlith Brown Memorial Lecture at the Lloyd Erskine Sandiford Centre virtually on Thursday, he said that just like American citizens must pay taxes regardless of where they work, Caribbean nationals employed abroad should contribute to their home countries’ tax base.

“When a Barbadian works in the United States, they pay US income tax, and not tax to the Government of Barbados,” he pointed out. “This needs to change.”

Professor Sachs highlighted that while Caribbean nations invest in the education and training of their citizens, many highly skilled workers end up earning significant incomes abroad which their countries do not benefit from.

“You train these people, they are Barbadian citizens… earning good incomes. Maybe they are remitting but in any event, they are not paying tax,” he said.

The noted economist acknowledged the region’s challenges and potential, noting that a more targeted strategy could increase its resilience and prosperity.

Assessing the Caribbean’s strengths, Sachs highlighted how Barbados compares favourably in life expectancy with the United States.

He attributed this to the “notable performance of the health sector, social sector, relative economic success, strong social conditions, and… a reflection of social trust in the society.”

However, he shared that the region’s economic development is stifled by various obstacles, particularly in education.

“The average years of schooling in Barbados is about 10 years,” he said, contrasting this with nearly 14 years in the US.

Sachs suggested that advancing educational systems up to the tertiary level is key, labelling it “the ultimate winning economic development strategy.”

He praised The University of the West Indies, envisioning it as a central force for educational and economic advancement.

“One of the most important development strategies for the Caribbean, therefore, is to make UWI one of the great universities of the world,” he said, describing it as a crucial asset in securing high-quality education and high-income opportunities for citizens.

The professor also noted a need to prepare for an “AI-driven global economy”, pointing to the importance of specific job skills.

“Better-educated, higher-trained workers are going to be the ones that will work alongside the AI systems rather than be the ones that are replaced by them,” he said, further urging leaders within the region to adopt progressive policies to prepare citizens for the technological shift.

Another important strategy for Caribbean economic development as highlighted by Sachs, was a shift to climate-proof infrastructure.

Climate resilience, he noted, is a matter of urgency, as he called for “a lot of hurricane proofing in every possible way…a lot of storm surge proofing and a lot of protection against the changes of hydrology, droughts, and floods.”

Sachs also recommended creating an insurance system to cover climate risks, explaining that this would involve “predictable premiums and rapid payouts in the event of destruction or income loss”, partly funded by wealthier countries.

Another key strategy raised by Sachs was the need for a regional approach to tackling crime and violence, as he acknowledged the role of the US in facilitating the influx of firearms to the region.

“Homicide [and] violent crime rates are high,” he said. “When I discussed this with senior officials and specialists throughout the region, they pointed to the US flow of weapons through the island… and other factors where the big neighbour plays, unfortunately, another very unhelpful role in being a centre of the violence that is spread throughout the region.”

While admitting that he does not have the solution to that challenge, Sachs noted that crime and violence were “a blight on quality of life” that requires “a regional focus and a regional understanding”.

Sachs further expressed hopes that the Caribbean will approach the US government to have detailed discussions and negotiations on these issues to create a collaborative framework for regional progress.

(SM)